St.

Mary university
Computerized accounting
Individual Assignment 1

 Submitted to: instructor Abel Demerew

 Name: Tsionawit Aweke

 SECTION: N
 ID: RAD/0825/2011

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1. Why you are studying computerized accounting?

a. List and discuss all the extra benefits you will gain from learning computerized

accounting by comparing it with the manual system.

 Accuracy
Computerized accounting has the advantage of higher accuracy when computed with manual
accounting. The potential for human error is greater when employees are manually completing
accounting procedure. The possibility of error is eliminated in a computerized accounting system
because the primary accounting data is entered once for all the subsequent usage and processes in
preparing the accounting reports. Normally, accounting errors in a manual accounting system occur
because of repeated posting of same set of original data by several times while preparing different
types of accounting reports

 Reporting
The advantage of computerized accounting includes fast, complex reporting. Computerized
system can produce invoices, purchase order and other documents more quickly. Many reports are
automatically updated and instantly available.

 Reliability
Because computerized accountings calculation is so accurate, the financial statement prepared
by computers are highly reliable and in addition the computer system is well-adapted to
performing repetitive operations. They are immune to tiredness, boredom or fatigue. As a
result, computers are highly reliable compared to human beings. Since computerized accounting
system relies heavily on computers, they are relatively more reliable than manual accounting
systems.

 Speed
Using accounting software, the entire process of preparing accounts becomes faster. Accounting
data is processed faster by using a computerized accounting system than it is achieved through
manual efforts. This is because computers require far less time than human beings in performing
a task. Furthermore, statements and reports can be generated instantly at the click of a button
therefor managers do not have to wait for hours or days to get important reports.

 Automaton
Since all the calculation are handled by software, it eliminates many of the mundane and time
consuming processes associated. Most of the computerized accounting systems have
standardized, user defined format of accounting reports that are generated automatically. The

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 accounting reports such as Cash book, Trial balance, Statement of accounts are obtained just by
click of a mouse in a computerized accounting environment.

 Transparent Error Correction

You can make a case for either manual or computerized systems when it comes to fixing errors
in your books. With a paper ledger, you'll be able to simply erase and overwrite any inaccurate
entries, or cover them with correction fluid. It's quick, it's easy and the corrections are self-evident.
Computerized accounting systems don't show physical corrections and erasures like paper ledgers
do, so instead, they have built-in safeguards to create an audit trail from any changes.

b. What additional components do you require to study computerized accounting system?

 Hardware: -the physical component includes disk drive, monitors, printer and the network
connecting them
 Software: - set of the program that causes the computer to perform the work desired
software for accounting alters, accepts, store transaction data and generate the reports that
the manager uses
 personnel: - they are people operating the system and they are crucial for the system
success

c. What are the drawbacks of computerized accounting systems?

Limitations of Computerised Accounting System

The main limitations of CAS are being dependent upon the operating environment they work in. Some of them
are listed as follows:

 Heavy cost of installation

Computer hardware needs replacement and software needs to be updated from time to time with the
availability of newer versions.

 Cost of training

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To ensure effective and efficient use of computerised system of accounting The sophisticated computerized
accounting packages, newer versions of hardware and software are to be introduced. These require special
training and hence, cost is incurred to train the staff personnel to understand the use of hardware and software
on a continuous basis because newer types of hardware and software are acquired to ensure efficient and
effective use of computerized accounting systems.

 Fear of unemployment

On account of the introduction of computerised accounting system, the employees feel insecure that they may
lose employment and show less interest in computer related work.

 Disruption of work

When computerised system is introduced, the existing process of accounting and other works are interrupted.
This results in certain changes in the working environment The accounting processes suffer a significant loss of
work time when an organization switches over to the computerized accounting system. This is due to changes in
the working environment that requires accounting staff to adapt to new systems and procedures.

 System failure

The danger of a system crashing due to some failure in hardware can lead to subsequent interruption of work.
This is more when no back-up is made The danger of the system crashing due to hardware failures and the
subsequent loss of work is a serious limitation of computerized accounting system. However, providing for
backup arrangements can obviate this limitation. Software damage and failure may occur due to attacks by
viruses. This is of particular relevance to accounting systems that extensively use Internet facility for their online
operations.

 Time consuming

When there is system failure, an alternative arrangement needs to be made to avoid loss of work. This
consumes some time to bring the regular processes back.

 Unanticipated errors not known

Unlike human beings, computers do not have the capability to judge or detect unanticipated errors in the
system, as human beings commit. This is because the software to detect and check errors is a set of programmes
for known and anticipated errors.

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  Breaches of security

The danger of viruses and hacking into the system from outside creates a strong need for security of the system.
Similarly, the person who has created the specific program can easily defraud by tampering with the original
records. Computer related crimes are difficult to detect as any alteration of data may go unnoticed. The
alteration of records in a manual accounting system is easily detected by first sight. Fraud and embezzlement are
usually committed on a computerized accounting system by alteration of data or programs. Hacking of
passwords or user rights may change the accounting records. This is achieved by tapping telecommunications
lines, wire-tapping or decoding of programs.

 Health dangers

Extensive use of computers may lead to many health problems such as eye strain, muscular complaints, back
ache, etc. resulting in reducing work efficiency as well as increased medical expenditure.

 Technical Issues

When dealing with computers, issues can arise. You may be completing year-end data for your accountant and
experience a power outage. Computers might acquire a virus and fail. There is also the potential of users
incorrectly performing software tasks that they are not familiar with. If a user tries to do one thing but
inadvertently does something else, it might take some work to undo the error.

 Disadvantage: Incorrect Information

Bookkeeping records are only as good as the data put into the system. Business owners that don't take the time
to establish account categories properly may enter data and generate reports that are not accurate.

Business owners can do a lot to mitigate the disadvantages and potential problems associated with
computerized accounting with proper planning and software integration. Taking the time to establish it correctly
is easier and cheaper than trying to backtrack because when a problem occurs.

2. What option do you have to start Peachtree if you missed its shortcut icon from the

desktop and again from the program list?

a. Write-down the name of the other option.

 From the source location/ where the software is installed

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b. Show the procedure that you will follow to open Peachtree using the option

named in “A” above.

 Double click "My Computer/ This PC" from the desktop, the window appears.
 Then Double click the hard drive where you installed the software (Local disk "C" is the default hard
drive).
 Locate and double-click the "Program Files" folder.
 Locate and double click the "Sage Software" folder.
 Locate and double click the "Peachtree" folder.
 Finally, as one of the contents of the Peachtree folder, you can find the PEACHW.EXE File with the
icon in its left side. Double Click it. At this point Peachtree Quantum started.

3. List and discuss all the procedures an accountant to follow to complete an accounting

cycle in the manual system.

Transactions Steps in the accounting cycle

#1 Transactions

Transactions: Financial transactions start the process. If there were no financial transactions, there would be
nothing to keep track of. Transactions may include a debt payoff, any purchases or acquisition of assets, sales
revenue, or any expenses incurred.

#2 Journal Entries

Journal Entries: With the transactions set in place, the next step is to record these entries in the company’s
journal in chronological order. In debiting one or more accounts and crediting one or more accounts, the debits
and credits must always balance.

#3 Posting to the General Ledger (GL)

Posting to the GL: The journal entries are then posted to the general ledger where a summary of all transactions
to individual accounts can be seen.

#4 Trial Balance

Trial Balance: At the end of the accounting period (which may be quarterly, monthly, or yearly, depending on
the company), a total balance is calculated for the accounts.

#5 Worksheet

Worksheet: When the debits and credits on the trial balance don’t match, the bookkeeper must look for errors
and make corrective adjustments that are tracked on a worksheet.

#6 Adjusting Entries

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Adjusting Entries: At the end of the company’s accounting period, adjusting entries must be posted to accounts
for accruals and deferrals.

#7 Financial Statements

Financial Statements: The balance sheet, income statement, and cash flow statement can be prepared using the
correct balances.

#8 Closing

Closing: The revenue and expense accounts are closed and zeroed out for the next accounting cycle. This is
because revenue and expense accounts are income statement accounts, which show performance for a specific
period. Balance sheet accounts are not closed because they show the company’s financial position at a certain
point in time.

Transactions: Financial transactions start the process. If there were no financial transactions, there would be
nothing to keep track of. Transactions may include a debt payoff, any purchases or acquisition of assets, sales
revenue, or any expenses incurred.

4. On the startup screen of Peachtree Quantum under other tasks, you can find an “explore a

sample company” option. What is the purpose of this option?

It allows you to examine company setup choices/options and to practice entering records and transaction. It’s a
great way to introduce yourself to the feature without using your own company data.

5. Why to delete an existing company? Discuss the procedures you could use to delete and existing company?

Procedure 1:

Open Peachtree and the company you want eventually delete then:

1. Click "Help" from the menu bar, point on "customer support and service" sub menu, and select "File
Statistics" sub menu. The "data file statistics for XYZ" window displayed.

2. Take a note of your company name “short version” displayed in the title bar of the “Data File Statistics
for: XYZ” window. The title bar displays "Data File Statistics for XYZ" where XYZ is the "short version" of
your company name.

3. Exit Peachtree. [This is obligatory. You cannot delete a company in an open status]. To exit from
Peachtree, you may click on the "Close" button found at the top right corner of the window or you may
click on "File" and then select "Exit".

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procedure 2:

1. Click on start; click on my computer/this PC

2. Double click on C: drive (hard drive where u installed Peachtree)

3. Click on program files

4. Click on sage Software and then on Peachtree

5. Click on company folder

6. Choose the company name you want to delete

7. To eliminate the company data from the software, press the "Delete" key from your keyboard; and
select "Yes" from the displayed confirmation window to confirm that you want to delete all the folder
contents.